Govt hikes investment limit for gold bond scheme
FinMin gets flexibility to design schemes
NEW DELHI, JULY 26:
Hoping to improve the response to the Sovereign Gold Bond Scheme, the government has increased the cap for subscription to 4 kg per person per year from the earlier threshold of 500 grams annually.
For trusts and similar entities, the cap has been hiked to 20 kg per year.
The decision was taken at a meeting of the Union Cabinet on Wednesday.
“In view of less than expected response of the investors to the scheme, and considering its bearing on the current account deficit and on overall macro-economic health of the country, it was felt necessary to make changes in this scheme to make it a success,” said an official release.
The ceiling will now be counted on financial year basis and will include the bonds purchased during the trading in the secondary market. To boost sales, the government can also give higher commission to agents.
The scheme will now be available “on tap”. “Sovereign Gold Bonds will be available ‘on tap’. Based on the consultation with NSE, BSE, banks and Department of Post, features of product to emulate ‘On Tap’ sale would be finalised by Ministry of Finance,” it further said.
Additionally, the Finance Ministry has also been empowered to introduce new features in the scheme.
“Flexibility has been given to the Finance Ministry to design and introduce variants of the sovereign bond scheme with different interest rates and risk protection and pay offs that would offer investment alternatives to different category of investors,” said an official statement.
Launched in November 2015, the scheme aims to discourage the estimated 300 tonnes of gold bars and coins purchased every year as an investment option.
It instead allows subscribers to invest in these bonds and earn interest of 2.5 per cent semi- annually.
The bonds can also be used as collateral and have income tax benefits.
The target mobilisation under the scheme was ₹15,000 crore in 2015-16 and ₹10,000 crore in 2016-17. The amount so far credited in government account is ₹4,769 crore.
(This article was published on July 26, 2017)